After exhausting available credit, BPA should exercise any and all repayment flexibility available under the law. (It may be appropriate to change current repayment practices reflected in RA 6120.2)

After exhausting all other sources of credit, an interfunction loan payable with market based interest on a specific schedule should be allowed for nonrecurring shortfalls. The loan repayment would be reflected in future rates of both functions (i.e., a cost to the borrowing function and a revenue source to the lending function). Any future surplus in the borrowing function would be dedicated first to prepayment of the loan. Some parties have suggested that in the event an interfunctional load is triggered, a complete independent audit of the function suffering the deficiency should be mandated.

1) FERC should have a role in determining the reasonableness of major (dollar limit?) planned investments before they are submitted to Congress for approval. Congress would, of course, not be bound by FERC’s recommendations and could authorize the investment and require its recovery in transmission rates.

2) FERC should have the authority to reject certain claimed investment costs as unrelated to the transmission business, except to the extent that Congress has previously spoken on the precise issue.

1) FERC should be allowed to reduce forecasted expense levels (e.g., upon a showing that the expenses exceed reasonable levels or exceed the reasonable forecast of what actually will occur).

2) FERC should have the ability to exclude expenses that it determines are unrelated to the transmission function.

Note: FERC disapproval of an expense for ratemaking purposes would not be tantamount to prohibiting BPA from incurring the expense. On a real time basis, BPA would simply have to manage as to keep costs at a level sustainable with its revenues.

FERC should have a role in deciding how much risk protection to be allowed in rates.

Still under consideration is whether to require BPA to engage in some form of consultation with customers, either before or immediately after filing new rates with FERC.

FERC should have no role to review or modify existing transmission contracts, but it may be appropriate to grant FERC an expanded role in interpreting such contracts to resolve disputes.

1. Federal preference is the antithesis of comparable access. Nonetheless, the group believed there are unresolved issues needing additional consideration before a recommendation can be formulated

2. Fish preference has economic consequences. The group believes fish related use of transmission should be addressed with market based solutions, and such solutions are now under development.

3. The group recommends that the preference for regional loads should be retained only as a tie breaker for simultaneous requests for transmission.

4.

Main Question:

How should an anticipated revenue shortfall (i.e., a forecast that revenues from sales will not cover costs) in either function be addressed?

Sub-Questions:

1. Is this a transition issue? Is it predictable that the shortfall will be eliminated in time or reverse itself and create future surpluses?

2. Can the shortfall be reduced by discontinuing some services?

3. Is the shortfall created or aggravated by cross-subsidies?

4. Can the shortfall be offset by targeted stranded cost charges or exit fees?

5. If a cross functional recovery is permitted in rates (which many oppose) what repayment obligation should result? In other words, should the payments be tracked to be paid back with interest if at all possible by the benefited function?